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A stock has a risk premium of 7.4% and the risk-free rate is 2.1%. What is the stock's fair return? Answer as a percent. Enter only numbers and decimals in your response.

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Answer:

9.50%

Explanation:

The risk free rate is a rate which has no financial loss over a certain period. The risk premium is a rate excess of risk free rate. The risk premium is calculated by subtracting risk free rate from rate of return on an investment.

The stocks return will = risk free rate + risk premium

Stock's fair return = 2.1% + 7.4%

Stock's fair return = 9.50%

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